More competition is coming into the nascent business of aggregating non-qualified mortgages and issuing mortgage-backed securities drawn by the market’s potential for profitable growth.

Three issuers of prime non-agency MBS have bucked industry standards and closed deals where some of the loans weren’t subject to pre-securitization reviews by third-party due diligence firms. The trend could cause problems for MBS investors, Moody’s Investors Service warned this week.

A handful of banks account for a large share of the loans in prime non-agency mortgage-backed securities issued since the start of 2017, according to a new ranking and analysis by Inside Nonconforming Markets. Banks were four of the top five originators of securitized prime mortgages between January 2017 and June 2018. More precisely, these banks ranked among the top known sources of collateral for these deals. In fact, the name of the originator was ... [Includes two data charts]

In a potentially significant shift, Wells Fargo has set aside $507.0 million in mortgages for inclusion in a non-agency mortgage-backed security. Wells is the top jumbo lender and some industry analysts suggest that the jumbo MBS market won’t rebound until banks like Wells stop retaining production in portfolio. Wells said loans designated as held-for-sale for a future MBS are nonconforming mortgages that would have otherwise been stored in its portfolio. Although no other details about ...

Annaly Capital Management plans to include a much higher share of non-qualified mortgages in its latest non-agency mortgage-backed security than the first deal issued by the real estate investment trust this year. Non-QMs will account for 45.4 percent of the $383.5 million issuance, according to presale reports by Fitch Ratings and Kroll Bond Rating Agency. Annaly’s first MBS was largely stocked with loans that had seasoned for at least 10 years – well before the QM rule came along ...

Moves by three issuers of prime non-agency mortgage-backed securities to allow for third-party due diligence reviews to be completed on fewer than 100 percent of the loans in an MBS could increase the risk of losses for MBS investors, according to Moody’s Investors Service. In a report released this week, Moody’s said narrower due diligence reviews increase the likelihood of defective loans appearing in non-agency MBS. The rating service added that representations ... [Includes five briefs]

The non-agency MBS market had arguably its best quarter since the financial crisis during the April-May production cycle, generating $20.72 billion of new securities, according to a new analysis and ranking by Inside MBS & ABS. [Includes three data charts.]

Non-agency MBS investors might not be aware of the differences in representations and warranties provided by issuers of new non-agency MBS, according to Fitch Ratings. In a recent report, the rating service noted that issuers are diverging from standard practices in terms of “full” rep-and-warrant frameworks.

Issuance of non-agency mortgage-backed securities reached a third straight post-crisis quarterly record during the recently completed April-June cycle, according to a new ranking and analysis by Inside Nonconforming Markets. A total of $10.03 billion of non-agency MBS backed by new jumbo and expanded-credt originations was issued in the second quarter. The previous quarterly record was $6.28 billion in the first quarter of 2018. And in ... [Includes one data chart]

A handful of issuers of non-agency mortgage-backed securities not rated by Fitch Ratings were called out in a report by the rating service regarding representations and warranties. The report released at the end of June detailed how reps, warrants and enforcement provisions for various issuers compare with a “full” rep-and-warrant framework established by Fitch. The rating service includes an assessment of reps and warrants for all of the non-agency MBS the firm rates but the report also ...